Eighty Years After the Great Crash -- 'Is It the '30s Again?'

Wall Street Journal ^ | OCTOBER 18, 2009 | BRETT ARENDS and DAVE KANSAS

[IrishMike]

Markets and the economy look less cataclysmic than they did earlier this year. And so they should, following a torrent of monetary easing.

But that doesn't mean happy days are here again.

If you want a second opinion, don't look at the Dow Jones Industrial Average. Look at three other markets: bonds, gold and the dollar. All of them are flashing amber, or red.

Take the bond market: Yields on U.S. Treasurys have collapsed to historic lows. The 30-year bond is yielding just over 4.2%, well below long-term averages. This is usually a strong signal of tougher times ahead. It's almost impossible to reconcile this with the stock market's sunny vision of a swift economic rebound.

Meanwhile, the dollar has been slumping on world markets. It has been the cornerstone of the global economy for nearly a century, but is quickly losing its credibility. No wonder gold, in its stead, has been surging to new highs.

These ominous signs should hardly surprise us. Despite the cheerleading in Washington and on Wall Street, we have barely begun to address the fundamental problems that led to the crisis in the first place.

Americans are hocked up to the eyeballs. When compared with the size of the economy, U.S. debt levels are off the charts.

That's true for government, corporations and ordinary families. Thirty years ago, the average U.S. household had debts equivalent to about 32 weeks' income. Today it's 59 weeks.

That's why comparisons with previous recessions ring so hollow. The U.S. came out of the slumps in the early 1980s and early 1990s with much stronger balance sheets. Households and corporations had much greater ability to borrow and spend.

The last time the economy tried to climb out of a deep slump while already this deeply in debt was...the 1930s.

[668 - Neighbor of the Beast]

Let me know when they start making the classic screwball comedies.

[samsmom]

I don’t know about the ‘30’s again. It seems to be a toss up between the ‘30’s (regarding money) and the ‘50’s (cold war and nuclear annihilation). We got the worst of both! And we’re plumbing new depths on just how much in the hole our government is digging us into. What happens if this health reform debacle goes through AND Cap & Tax AND VAT. Who is John Galt?

[djf]

Any zombies here? Anybody ever eat brains from any animal?

Just wunderin...

[Vaduz]

Take the bond market: Yields on U.S. Treasurys have collapsed to historic lows. The market may take a beating today.

[rbg81]

The Germans at Stalingrad bashed in the heads of their horses to eat their brains. Apparently a grest source of protein. Just saying......

[rbg81]

If anything, that tells me the Bond market is past due for a reality check. Who would buy US Treasuries at near zero interest with the dollar falling? Yields clearly need to rise, but Bernake is keeping them low by printing $$ to buy treasuries so the Government can do more stimulus. This, in turn, will cause the dollar to keep falling.

Does anyone else see a vicious circle here?

[Huebolt]

Let me know when they start making the classic screwball comedies.

I just heard this obama quote which is quite to the point:

"La la la la la, I can't hear you, la, la, la, la, nobody hears nothing, la, la, la."

[Huebolt]

The Germans at Stalingrad bashed in the heads of their horses to eat their brains. Apparently a grest source of protein.

The Russians ate the paste off of library book bindings. We have no idea...

[Huebolt]

Does anyone else see a vicious circle here?

It's all been done before, see ARGENTINA. A loaf of bread for $1 million, or so.

[rbg81]

We have no idea...

---

Nope. And G-d willing, we never will.

[pelican001]

“And G-d willing, we never will.”

I’ve seen this more and more lately. Why do you (and many others) write “G-d”? Is God now a dirty word?

[Travis McGee]

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

-~~Ludwig Von Mises

“Several brokerage houses tumbled; blue-sky investment companies formed during the happy bull market days went to smash, disclosing miserable tales of rascality; over a thousand banks caved in during 1930, as a result of marking down both of real estate and of securities; and in December occurred the largest bank failure in American financial history, the fall of the ill-named Bank of the United States in New York.”

~~"Only Yesterday: An Informal History of the 1920’s" by Fredrick Lewis Allen

[rbg81]

I can't speak for the others. In my case, Jews aren't supposed to directly say G-d. Its done out of respect and reverence for His name--no other reason.

[TrueFact]

The last sentence of the WSJ article says it all: “Don’t be fooled.”

[ExTexasRedhead]

More like 1930’s Germany to me.

[FromLori]

Have you seen the market tickers take on the article?

http://market-ticker.denninger.net/archives/1519-How-To-Stop-The-Pretending.html

[TexasRepublic]

“Let me know when they start making the classic screwball comedies.”

It will be a different kind of Marx brothers, this time around.

[Cindy]

Are you looking for a job?

This thread has been updated:
http://www.freerepublic.com/focus/chat/2306857/posts